What is HVCC?

Effective May 1st, 2009 the Home Valuation Code of Conduct (HVCC) was created to reinforce appraiser’s independence, protect lenders from unethical practices and to improve the overall integrity of the valuation process.
As a way to protect consumers it makes sense because it shields appraisers from being influenced by lenders; but from a practical point of view is curb-some and more expensive to borrowers because it forces them to lock in the mortgage rate. In the past the principle of independence was violated too often and it was one of the reasons the prices could keep increasing at an unrealistic pace but the impact in closings dates and disputes is yet to be determined.

How it Impacts the Closing Timeline?

-The earliest a transaction can take place is 7 business days after the borrower is issued his mortgage disclosures from the lender.
-Upfront fees can not be collected by the lender until disclosures are received by all the borrowers. Starting July 30, 2009 the fees can be collected only when the application is taken in person and the home-buyers receive the initial disclosures
-The Lender does not order the appraisal directly;  it can cause a delay in the process and the appraiser might not be the most qualified for an specific area.
-The borrower must receive a copy of the appraisal at least 3 days prior to closing date; the buyer has the option to waive this requirement.
-Any increase of more than 1/8th percent in the APR from the initial Truth in Lending Disclosure must be disclosed to the borrower and it must be received at least 3 days prior to closing. This requirement implies that the rate should be locked or it may change during the course of the transaction creating potential delays in the closing date.

As good as it is to protect consumer, as a real Estate Agent I find the process complicated and an additional potential source of conflict between the Buyer and the Seller. There are enough things that can go wrong in the course of a real estate transaction and each an everyone of them can delay closing dates.

Why Closing Dates are so Important?

Because there is a lot of stress involved in moving! The truck is already loaded, I have to leave my place by certain date, I have no place to go, delaying the closing will cost me X amount of dollars per day…  you name it! If you have been there you will understand it better. Let’s say the closing is scheduled on June 30th.; the Buyer received the commitment letter on June 15th, there mortgage rate increases 1/4% by June 29th and the Buyer didn’t lock in his rate. What happens? New Disclosures must be sent to the Buyer and the closing can’t take place until August the 2nd. With such a short notice can you imagine how Buyer’s and Seller’s life is disrupted.
I always say to my clients: the closing date is a target date…be prepared for last minute changes and have your plan B ready. We all work very hard to close on time but many things can happen at the last minute. Having expectations set up upfront eases the frustration but does not avoid it. It easier said than done!